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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are hawking US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a depreciation of the Argentine peso after the voting is over. President Javier Milei has placed a cap on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for contributing to control price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors began losing confidence in the government’s agenda in recent months following a shaky result in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with a bullish determination to enact public demand despite elite opposition.

Farage to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: wary of being accused of proposing a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray Farage as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.